Every Single Type of Trading Strategy

After you have written down a few dozen, even a few hundred of your beliefs about life, people, money and the markets, you now know where you currently stand. You know what your current attitude and philosophy is at this moment in your life about those four things (life, people, money, markets).

The next step, especially if you are still a bit unsure about what type of trader you want to become, or what strategy to choose, is to, well, Create A List of Every Single Type of Trading and Investing Strategy. If you are hesitant, unsure, about what type of trader or investor you want to become, it is a good idea to know where you currently stand with your beliefs, but also to investigate and do a bit of research to know just what is out there in the world.

Here is a bit of my trading wisdom for you:

In order to find a trading or investing style that fits your personality, you need to have a large list of all the different possibilities and choices that are available to you.

If you don’t know whats out there, how can you possibly find something that will suit you?

Or if you want to develop your own unique style, you can pick and choose the various elements from different strategies that resonate with you.

My trading strategy has a few different elements mixed in. I have a small bit of stop hunting, technical analysis and short term tactical trading, combined with a heavy dose of global macro scenario based trading.

This is a step that almost no one takes, and something that I was unaware of in my early parts of the trading journey.

Here is what I roughly did in the first few months, even a year or two of the trading journey: I browsed the trading forums, opened up dozens of threads about technical indicators, forex robots, trading strategies in my browser. I must have literally had dozens of tabs in my internet browser open from various trading forums. I thought I was going to become the master trader, knowing every single type of strategy that the trading gurus on the forums were using. I thought that the more tabs I had open about various indicator threads, expert advisor threads, etc, the more I could develop a super trading system and the more money I would make.

The way my mind worked back then, was I thought I could immerse myself into the trading forum world, expose myself to all this information and come up with a super trading system. I thought I would take the best from each. Take a stochastic system from one person, mix it in with some moving average strategy from another forum thread, add in some chart pattern signal, sprinkle in a bit of price action analysis with Pinocchio bars, add in a forex robot or divergence signal for confirmation, and viola, a holy grail type system.

As you can imagine, it failed miserably. I didn’t realize at the time, that all the techniques and indicators I was using, were not based on the foundations of what actually caused the market to move. They were not based on market truth.

This is the same exact situation that tens of thousands and hundreds of thousands of aspiring traders mind themselves in today. They do something similar to what I did, browsing the trading forums, hoping to find some nugget of valuable trading wisdom.

I am not here to tell you that all the trading forum threads are useless. There is some value there. The problem is that you have to dig through so much dirt and garbage in order to find any good pearls of trading wisdom. And the pearls you do find, are usually not valuable enough to offset the time and effort you spend wading through all the garbage forum threads and exposing your mind to such bad market information, beliefs and programming.

There is most certainly a better way! You don’t have to settle for spending 50 hours on the trading forums to find just a handful of trading wisdom. You don’t have to wade through 95% B.S. in order to get to the 5% good information. You can actually develop skills and the right attitude and philosophy, so that if you do spend 50 hours searching and researching for trading information, you know where to look, and what to look for, so that the vast majority of your time, say 70-95% is spent on the really good information that you want to feed your trading mind.

Also, another big disadvantage of trading forums, is that it is a… very small world.

After spending a year or so on the trading forums, I thought that the only possible trading strategies out there revolved around technical indicators, chart patterns, price patterns, and some quantitative based forex robots (expert advisors). I didn’t know what existed out there in the world. There were literally dozens of other ways to look at the market, but I was blind to all those ways, because the trading forums are just not going to expose you much to the really good trading strategies out there.

I used to think that if I didn’t succeed with technical indicators, chart or price patterns, etc that I would be a failure as a trader. If I thought my strategy didn’t jive with the rest of the forum participants, that I would be weird or something. Sort of like how some people feel that if they don’t get along with the kinds from childhood, that they would have no friends and be a loner. But those are just false and limiting beliefs. There are literally millions of people out there, and I am sure you can find a few dozen or hundred to become friends with, get along and have a value for value relationship.

Similarly, if you are just stuck browsing the trading forums, your mind can be closed minded to the breathtaking possibilities that exist in trading the financial markets. You just don’t know what is really out there. You don’t know the different type of trading strategies and life that exist for some people who have managed to break through the limiting beliefs that 80-95% of the people in the world hold.

This is why, you should take the important step of spending a bit of time and doing research and listing every single type of trading and investing strategy that exists in the world today. You don’t have to find ALL of them. But find enough of them. This becomes your “master list” of trading strategies that you can pick and choose from.

Once you know ALL, or almost all of the different types of strategies, or traders, or investor that you can be, and have a brief description of them, well then you can choose which one you want to be and learn more about.

I never took this step in the beginning, because I was in the close minded world of trading forums.

Now I am going to help you along and get you started in creating this Master List of every (or almost every) type of trading strategy, investing strategy, etc.

#1 – The first step is to write down what trading strategies you currently know about.

For example, if the only thing you know about are technical indicators, chart patterns, price patterns and forex robots, then write those down:

You can have more than you’ve got because you can become more than you are.

You can have more trading profits and income than you already have, because you can become more than you are! You can grow and learn about the many different strategies that exist out there. You can replace false beliefs, low value and irrelevant tasks and thoughts, with more productive trading beliefs and habits that will get you to where you want to go.

Now, since you are reading this lesson, you can take your trading mind and beliefs to the next level.

So what are the additional strategies you can add to the list?

Well if you have browsed this website, there are a few order flow based strategies such as stop hunting, option barriers and news trading:

#2 – Then the next step is to start doing a bit of research and analysis of some of the great trading books on the recommended list, as well as on some of the richest traders and investors in the world.

Write down all the different types of investors, different types of traders, different types of strategies that exist out there. Try to break them down into categories and strategies, etc.

For example, if you were to research Warren Buffett, he says that he uses “value investing.” So add value investing to your list.

If you were to research Carl Icahn, you might discover that he is a “corporate raider”, or “activist investor.”

If you were to research George Soros, you might say he uses a “Global Macro” strategy.

If you were to research Alfred Winslow Jones, you might say he used a “Long/Short Equity” strategy – finding good stocks to buy that would go up and finding companies to short that he thought would go down.

If you were to read some of the Market Wizards books, you will discover an eclectic mix of strategies.

Some of them are floor traders and are scalpers such as Tom Baldwin and Brian Gelber,

Others are engaged in a combination of technical and macro trading such as Paul Tudor Jones, Bruce Kovner, Michael Marcus, Stanley Druckenmiller

Others are engaged in systems trading trying to program a quantitative system such as Richard Dennis, William Eckhardt, the Turtles, Jaffray Woodriff, Edward Thorpe.

Others are engaged in forms of option strategies such as Victor Sperandeo,

Others use option arbitrage strategies, such as Tony Saliba, Jeff Yass, John Bender.

Others use purely chart patterns such as Al Weiss.

Others do “growth stock investing”, such as Richard Driehaus.

Others do purely “small cap investing” such as Steve Watson.

Others are purely short sellers operating in the stock market, such as Dana Galante.

If you read the book, The Alpha Masters, you may discover new strategies such as Merger Arbitrage, and Distressed Debt.

Or perhaps you were reading the books such as Inside the House of Money, or The Invisible Hands, and you struggled a bit with understanding them. But you try to extract the key principles and types of trading strategies they use and you list them as “relative value arbitrage” or “statistical arbitrage.” Perhaps you have no clue about them currently, but at least you know the name of the strategy.

Not all of the strategies still work. For example floor trading is kind of dying out. There are still some people I heard who are manually scalping the electronic markets and doing what the floor traders use to do.

Other strategies and inefficiencies will always exist. Things like Global Macro trading, option strategies and arbitrage, long/short equity, some forms of quantitative trading, growth investing, value investing, they all have their time and place. Not all of them have the capability of making money every year (although global macro always has that ability), but they are still viable strategies for some people.

You want to broaden your horizons. You want to get a feel for what is out there for you to explore. This is especially a must have step if you are not experiencing the success and profits you desire and are confused about your trading approach and philosophy.

Do this and have a good sized list. You don’t have to write down everything. No one can know everything. You just try to get a feel for the world of possibility out there. have at least one or two dozen different types of strategies and investors/traders.

Then the question becomes, how much capital do some strategies require? Does the little guy have access to all these strategies?

You will discover that some types of strategies require large amounts of capital and there isn’t much access to the individual trader with a small account. For example, you couldn’t really do “activist investing” by yourself, because the activist requires a large amount of capital to buy a lot of stock and try to make changes in the company. You can coattail another activist, but you can’t do the activism yourself.

Other strategies such as distressed debt can require several million dollars and much more to access it. So if you are only started off with a few thousand or a few tens of thousands of dollars, you won’t be able to really do it.

Other strategies may require large capital expenditures to build a computer and research infrastructure. A lot of quantitative traders like Jim Simons, David Shaw, etc all typically have big investments to make in their technology infrastructure to find the quantitative inefficiencies.

But you should not despair, since there are many strategies out there that you can access that don’t require huge sums of money. Strategies such as technical analysis, global macro trading, and plenty of option strategies do not require large sums to begin trading with. You can trade forex or futures contracts, or stocks using free technical analysis and charts if you desire to. Or you can use some form of global macro analysis to formulate your strategy. Even though you may not be able to place the same exact trade in the exact same way as some of the really rich people, you can most certainly still apply global macro analysis and those types of trades to a lot of different trading systems. If George Soros used a global macro strategy to short the British Pound back in 1992, you can still use a global macro strategy to trade spot forex in the year 2013 as well!

Therefore, if you plan on trading a small account of say less than $100,000, and try to make it grow into a big account, then choose a strategy that you have easy access to. Choose a strategy that offer you plenty of trading opportunities, and offers you the flexibility of some leverage. Strategies such as global macro trading, order flow trading, even some option strategies in stocks, long/short equity, etc all offer you tremendous opportunities, action and volatility even if you have a small account of $5,000 or $10,000, etc.

Also, the great thing about some of these strategies is that the more successful you are, the more profit you make, then you can just keep on implementing the same or a similar strategy as your account grows. You just increase your position size. If you were only previous trading $10,000 or $50,000 or $100,000 of currency trades using global macro trading, well as your account grows, you can increase your trading size using the exact same strategy. You start trading in sizes of $500,000, and $1,000,000, etc. If you previously only traded with 1 futures contract, well as your account grows, you can just keep using the same strategy, but increase your trading size to 5 contracts, or 10 contracts, etc. If you previously were only trading with 100 shares of stock, well as your account grows, you keep using the same strategy, but now you place trades with 1,000 shares or 10,000 shares, etc.

That is what a lot of top traders do. They got really good at one type of strategy, and they just kept using the same, or a similar strategy as their account grew. They just increased the position size. Paul Tudor Jones was interviewed in 2000, and he said:

I’m probably the same exact trader as I was 15 years ago.

He just does the same or similar, thing, but places bigger trades due to his larger account equity.

Therefore, once you have a decent idea of what your current market beliefs are, the next step is to create a list of all the different types of trading strategies you can think of and research. Try your best. Don’t worry if you miss a few or wrongly name a strategy, etc. Your knowledge and skill will grow and you will correct any mistakes. What’s important is that you try. Life is only worthwhile if you try.

Trend following can be done with many of the strategies listed in the lesson. You can apply some sort of trend following principles to many different strategies. You can do trend following with technical indicators and chart and price patterns. You can do trend following with some sort of quantitative program. You can do trend following with global macro trading. Etc.